Nice beats expectations but profitability pressure mounts in AI transition
The Israeli software company posted higher-than-expected revenue, but declining margins and rising AI competition continue to weigh on investors.
Nice beat analysts’ expectations in its second-quarter 2026 results, reporting revenue of $782 million, an 8% increase compared with the same quarter last year, and adjusted earnings of $2.70 per share. Analysts had expected revenue of $770 million and earnings of $2.65 per share.
However, the Israeli customer experience software company’s profitability continued to deteriorate, extending a trend that became apparent in the first quarter as the company pursued an aggressive deal-closing strategy.
Gross profit margin declined to 64% of revenue, compared with 66.8% in the corresponding quarter last year. The decline contributed to lower operating profit, which fell to $104 million, while operating margin dropped from 22% a year ago to 13% in the current quarter.
Nice ended the quarter with GAAP net income of $83 million, representing a decline of more than 50% compared with the same period last year. Earnings per share remained in line with expectations, partly due to Nice’s ongoing share buyback program, which reduces the number of outstanding shares and helps offset the impact of lower net income.
Excluding one-time and accounting-related items, Nice reported non-GAAP net income of $160 million, compared with $190 million in the second quarter of 2025.
Against the backdrop of a market facing growing competition from emerging AI-focused solutions, Nice issued a cautious forecast for the third quarter. The company expects revenue of $780 million-$790 million and earnings of $2.73-$2.83 per share.
At the same time, Nice reiterated its full-year guidance, forecasting 2026 revenue of approximately $3.2 billion and earnings per share of $11.06-$11.26.
“We executed well in the second quarter, delivering revenue above the high-end of our guidance range and reaching the high-end of our non-GAAP EPS range,” said Scott Russell, CEO of Nice. “Underlying demand trends across our business continued to gain momentum during the second quarter as organizations increasingly consolidate their customer engagement needs on our AI-native CXone platform. This drove a record second quarter for new cloud ACV bookings, including an all-time record quarter for AI bookings with strong momentum at NiCE Cognigy. AI continues to become a more meaningful contributor to our business, with AI ARR reaching $362 million and now representing 15% of our cloud revenue. We are still in the early stages of a much broader AI adoption cycle across our customer base.”
Nice’s share price has declined 32% over the past 12 months, reflecting investor concerns over slowing profitability and intensifying competition in the AI era. Since the beginning of 2026, however, the stock has recovered somewhat, narrowing its year-to-date decline to 8%.
The company currently has a market capitalization of approximately $6 billion.
